Plug Power – In the profit zone with H2 production

Project manager Robert Zalinski presented Plugs products at the new Duisburg site

The plans are huge: three sites are to start production already this year. The first target for the current fiscal year is 70 tonnes of hydrogen per day. This should enable a profit margin of 30 percent. Of this, 40 to 50 tonnes per day are needed for existing activities and 20 to 30 t/day will be brought to market as a tradable commodity, is my expectation. 

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Plug Power expands to Europe

Project manager Robert Zalinski presented products and site
Project manager Robert Zalinski presented products and site

The US corporation Plug Power opened its European headquarters in Duisburg, Nordrhein-Westfalen (NRW) on March 18th, 2022. The new production site of Plug Europe lies at the center of Duisburger Hafen, the world’s largest inland port. CEO Andy Marsh had really wanted to make a special trip from the United States to make the opening speech, but he was unable to because of a corona infection. Chris Suriano stepped in for him. Suriano declared, “Our local presence is very important in our key markets.” He smugly added, “We have only just begun.” 

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Plug Power – (too) many projects worldwide?

Hyvia van by Renault and Plug, © Hyvia
Hyvia van by Renault and Plug, © Hyvia

Plug Power is benefiting from the fact that a variety of analysts view the company to be a front-runner in an American hydrogen economy in 2023/24 and one that should be very well positioned to produce green hydrogen through the development of its own electrolyzer capacity in the longer term. In nine years’ time, a revenue of USD 9 billion may even be possible. Until then, a hydrogen price of USD 1 per kilogram should be achievable, according to Evercore analyst James West.

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The stock exchange is also guided by interests

Prices from 15 August 2021, © www.wallstreet-online.de
Prices from 15 August 2021, © www.wallstreet-online.de

The daily price fluctuations of the shares in the hydrogen and fuel cell sector discussed here – primarily those from the USA and Canada – give an indication that very different interests determine events here: Thus, on many days in July 2021, there was a concurrence of price declines with almost identical percentage losses in the prices of all these shares with manageable trading volumes at the same time. In other words: The buy side held back and the forces betting on falling prices had the upper hand. However, no selling pressure could be detected, which is reflected in the amount of shares traded.

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Plug Power – new manager comes from Tesla

With US$ 5 billion in the bank, Plug can position itself perfectly in the hydrogen and fuel cell theme complex. This includes its own H2 production as well as the development of alliances, such as the most recent one with Renault. And it is advisable – in my opinion – to reduce the one-sided focus on the market for forklift trucks (material handling), since the major manufacturers such as Toyota and Kion are pursuing their own hydrogen strategy in the future and the devices of future generations will already have a fuel cell system included, so that the conversion or expansion of a battery is not necessary.

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New hydrogen and fuel cell partnerships

Luca de Meo (Renault Group, left) and Andy Marsh (Plug Power), © Renault
© Renault

The time has come for new collaborations in the hydrogen sector. As noted in this year’s May issue, the number of reports about company mergers and new partnerships has increased steadily over the past months. One example of this is the partnership formed by electrolyzer manufacturer Nel after its recent foray into the solar market. In early May, the group announced that one of its subsidiaries, Nel Hydrogen Electrolyser, is now working with First Solar, a manufacturer of PV modules, to design integrated solar-hydrogen power plants.
A short time later, news broke that Danish hydrogen business Everfuel and Norwegian aluminum maker Norsk Hydro signed a memorandum of understanding to improve conditions for electrolyzers in Europe. The agreement contemplates installing the Hydrogen Distribution Centers that are being developed by Everfuel at electrolyzer sites near Norsk Hydro’s aluminum smelters to ensure the fast and safe refueling of the latter company’s hydrogen trailers.

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Plug Power – cash infusion drives up price

Production facilities of HYVIA, © Renault
Production facilities of HYVIA, © Renault

A few months ago, Plug Power [Nasdaq: PLUG] was forced to revise several of its previously published financial statements. While the accounting errors were not severe enough to have a material impact on the statements, they resulted in a USD 62.9 million decrease in R&D costs in the years 2018 to 2020 and a corresponding rise in cost revenue. Furthermore, non-cash charges, including charges associated with warrants Plug granted to Amazon and Walmart, exceeded USD 400 million. That’s pretty notable. Do these charges have anything to do with Plug’s relatively high amount of short interest, which comes to over 50 million shares? Could Amazon and Walmart have exercised warrants? Or have they now shorted stock to shore up their unrealized gains running into the billions of dollars?

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Plug Power buys Giner ELX and United Hydrogen

Plug Power stock is resilient. On the plus side, Plug [Nasdaq: PLUG] completed its USD 123 million acquisition of Giner ELX and United. It will allow the company to not only produce hydrogen but also start making electrolyzers. As I often noted, this kind of deal would be needed for an upward trend in Plug’s price. Moreover, the fuel cell supplier announced that it had received several sizeable orders, including a recent one from a new UK customer, Asda, a Walmart subsidiary.

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Plug Power to produce electrolyzers and hydrogen

In my view, Plug Power [Nasdaq: PLUG] is definitely on the right track: Building and expanding liquid hydrogen production facilities while planning to acquire United Hydrogen. The latter’s 6.5-ton annual capacity should be raised to 10 tons, thus meeting 25 percent of Plug’s in-house demand, meaning eventually the profit margin can come from consumables. Plug is also negotiating with an electrolyzer manufacturer that could or should be absorbed. That all looks very good to me. In a few years’ time, Plug intends to cover more than 50 percent of its own production with green hydrogen.

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Enter the hydrogen decade

Historical price data on the five companies covered in this issue
© wallstreet-online.de

Since the beginning of the year, the fuel cell stocks covered in this issue had seen a fast uptrend, which ended with the spread of Covid-19 around the world. Fears over the impact of the disease on the global economy meant some gains were quickly lost. Still, in light of increased news coverage, multiple project announcements and the growing popularity of green hydrogen, it has become clear that hydrogen and fuel cells are entering the mainstream and their breakthrough into the market is approaching rapidly.

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